Following the lower economic growth rate reported by the National Bureau of Statistics (NBS) for the first quarter of the year, which confirms various projections of economic recession in 2020, business leaders and economic analysts have called for policies that will stimulate massive investment in infrastructure, agriculture, tax incentives, as well as immediate termination of lockdown measures among others as measures needed to enhance the nation’s exit from the impending recession.
Their position is coming on the heels of the comments by the Minister of Finance, Zainab Ahmed, last week Thursday that Nigeria’s economy is heading towards economic recession in 2020.
Addressing journalists after the National Economic Council meeting, The Minister said: “The National Bureau of Statistics (NBS) has made an assessment. So, it is the NBS assessment that Nigeria will go into a recession measuring at an average of -4.4 percent.”
The Minister however said that the Federal government hopes to achieve a milder recession, saying: “But with the work that the Economic Accessibility Committee is doing bringing stimulus packages, we believe that we can reduce the impact of that recession.
“And if we applied all that have been proposed and we are able to implement it we may end up with a recession that is -0.4 per cent. In any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021”.
While the business leaders did not agree on the feasibility of Nigeria having a mild recession (-0.4 percent) as hoped by the FG, they however agree there is need for a range of policy measures to expedite the country’s exit from the impending recession.
Need for investment
“There is a need to reset the policy and regulatory environment to stimulate domestic and foreign investment. The mix of tax, tariff, monetary, foreign exchange, regulatory and investment policies needs to be regularly rejigged to spur economic growth,”said Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry (LCCI).
Also speaking on the need for investment stimulating polices, Yinka Sanni, Group CEO, Emerging Africa Capital Group, said the -0.4 percent best case scenario figure would only be achieved if a robust stimulus package, not be less than 19 percent of GDP is put in place.
According to her, the stimulus package must be largely targeted at the productive sector of the economy, for instance, the micro-small and medium scale enterprises, which also accounts for the majority of jobs.
“Policy reforms targeted at incentivising investments in infrastructure through the capital market should be considered. The proportion targeted at the bottom of the pyramid should be changed through micro-finance institutions and similar intermediaries in the money and capital markets in order to deepen financial inclusion.
“Robust fiscal stimulus such as tax incentives, waivers, and other policy interventions to incentivise long term investments in the real sector should be put in place, while reforms to encourage the institutionalisation of domestic investments in the agribusiness and food value chain should also be considered.
“Policies to liberalise raising of long term capital by sub-national governments and corporate entities to stimulate infrastructure provision and development at state and local government levels, policies to incentivise the raising of long term investments to back up domestic investments in the alternative energy space as well as policies to incentivise growth in exportation of goods and services are all necessities.”
While describing the -0.4 percent GDP expectation of the FG too optimistic, Ayodeji Ebo, CEO, Afrinvest Securities, recommended a more target borrowings towards capital expenditure as well as elimination of the trio-subsidies (Petroleum, Power and foreign ) to free up more resources for the government.
He added that “The Government can also reduce their stakes in some of the companies to create additional revenue. Also, a review of the PPP policy to provide confidence for private investors especially contract enforcement will go a lot way in attracting Foreign Direct Investment which will boost economic activities. We also need a clearer direction from the CBN regarding the exchange rate to avoid a repeat of 2016 which will impact negatively on economic activities.”
Stressing the need for increase partnership with the private sector to spur investmestment spending, Ayo Akinwunmi, a Senior official of FSDH Merchant Bank said: “Government team can spur investments in the economy to avert the impending recession by doing the following: Embark on massive infrastructure development through partnership with private sector; Encourage massive investments in the downstream oil and gas through deregulation; Encourage massive investments in the power sector through cost-reflective tariff; Encourage massive investments in the upstream oil and gas through the passage and signing into law the enabling laws such as PIGB and PIB;
“Encourage the developments of Solid Mineral resources; Government should provide a system where it will buy access to agricultural produce from farmers and keep in the strategic reserve; Regulators should work with small scale private sectors operators collaborate to develop business rather than acting as if they are discouraging the development of business; and Government to reduce cost of obtaining title documents for the development of affordable housing estate in Nigeria so that the sector will encourage a boom.”
Investment in Agriculture
According to Professor Uche Uwaleke, Professor of Finance and Capital Market, Nasarawa State University, Lafia and former Commissioner of Finance of Imo State, “Mechanized farming will go a long way in boosting food production. Doing so will bring down food inflation which was over 15 percent as of April according to the NBS. Secondly, there is no doubt that the CBN’s interventions in Agriculture, especially the Anchor Borrower Scheme, has helped in no small measure to grow the sector.
“It is time to expand and scale up the interventions to cover more products and States of the Federation. The IMF has projected that the Nigerian economy will tank by -3.4 percent this year. In order to reduce the size of the economic recession below forecast global average of -3 percent, it is important that the COVID’19 stimulus packages both by the government and the CBN are well targeted and executed in ways that will protect jobs and speedily reverse the present downturn in economic activities.”
On his part, Arc Kabir Ibrahim, National President, All Farmers Association of Nigeria AFAN, stressed the importance of incentivising the smallholder farmers in boosting productivity in the agric sector.
He said: “Today it is obvious that the only choice left to Nigeria is to restore the dignity and economic potential of agriculture to be able to prosper sustainably. This calls for higher investment, focus and sustainable policies as well as purposeful leadership.
“We should create a separate and well-funded advisory for the attainment of food security with NFRA, PFI, Cooperatives, Livestock and the Seed Council in one-stop-shop.
“Redefine cash-crops and manage them for efficiency and profitability under the Ministry of Trade and Investment.
“We should make credit readily available for Agricultural production, value addition and processing through a well recapitalized Bank of Agriculture, BoA, owned by the farmers.
“We should take direct charge of agricultural mechanization and heavily invest in it alongside science and technology to provide the impetus to locally fabricate spare parts and if possible complete units.
“The smallholder farmers in Nigeria should be further incentivized to produce more and be happy doing so by making them enjoy tax holidays or exemptions as being promoted by Governor Ayade of Cross River State who deserves commendation and should be modeled by the other Nigerian Governors.
Tax breaks and other incentives
“Another measure is giving tax breaks to certain category of companies — exempting some companies from paying taxes in the next one year.”, said Professor Onyi Nwagbara, Secretary of the Board of Directors, South East Region Economic Development Company (SEREDEC).
Speaking on the limitation of economic sector-specific bailout, he added that, “Nobody knows for how long this is going to last. Bailout alone would not do it. One big question is which sector would you bailout and which one would you leave. But if you give incentives, like tax breaks, creating the enabling environment, instituting a policy that if anyone wants to register a business, government would tell the Corporate Affairs Commission (CAC) not to charge money for this purpose for the next one year; they should also be given a tax break. These are some of the incentives and palliatives that the government can put in place for businesses to grow, for us not to dive deep into serious recession; because if we do, it would be very tough for us to get out of it, especially if the prices of crude oil continue to go down globally.”
Immediate removal of lockdown
Come of the experts also cited the need to FG should dismantle all lockdown measures in order to enhance the effect of its stimulus measures to rescue Nigeria from the impending recession.
Speaking in this regard, Professor Uche Collins Nwogwugwu, Professor of Economics of the Nnamdi Azikiwe University, Awka, said: “Stimulus measure is a fiscal action by government and -0.4 percent is achievable if we assume that corruption and other official leakages are reduced.
“The utmost measure to ameliorate the impact of COVID-19 is to dismantle all lockdown measures without further delay and migrate to containment. It is the very condition that may make the stimulus measures work efficiently.”
Supporting this view, Managing Director/Chief Executive Officer, APT Securities Limited, Mallal Garba Kurfi said: “Now that the first quarter, 2020 (Q1’20) closed with positive results it will be possible to achieve a mild recession in view of the palliative measures taken. The outcome of second quarter, 2020 ( Q2’20) result of GDP will decide otherwise. The measure include total removal block down in Lagos, Ogun, FCT and Kano will help the economy recovery fast. The extension of credit facility to manufacturing companies will also relieve the economy and the support for local substitute for most of our import products will make our recovery past.”
In its own reaction, Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu said: “The Nigerian Bureau of Statistics (NBS) has rolled out figures on the state of economy at the moment. Other institutions have stated similar positions. It is obvious that Nigeria is entering into recession but one cannot categorically conjecture the degree of severity at the moment.
“What we expect the government to do through the Minister of Finance is to release the specific steps to handle recession in bullet points. This will move to the level of seeking the buy-in of the citizens. At the moment, we have not seen a clearly defined model of the government in this regard. Everyone is simply lamenting and guessing about the way forward. I hope the government will drive the process through announcement of its plan to salvage the economy for enhanced support of all stakeholders.”
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